“New” pensions deal: same as the old deal

Submitted by Matthew on 11 January, 2012 - 12:03

Public sector union committees, branches, and workplace groups should call emergency meetings to reject the sell-out on pensions outlined at the TUC public sector group meeting on 19 December.

So far, only the PCS, Northern Irish public service union NIPSA and Unite (after initially signing up to a “Principles Document” with Unison, GMB and the Local Government Employers) have decisively rejected the deal.

Unison’s Local Government Service Group Executive voted by 24-10 on 10 January to accept the deal. Its Higher Education SGE also voted to accept, and its Health SGE voted to consult (but not formally ballot) members on the issue. In advance of the meeting, Health SGE member and Workers’ Liberty member Alison Brown was bureaucratically prevented from attending and voting, showing the Unison leadership’s desperation to hamstring opposition to the sell-out.

Teaching unions NUT and NASUWT have said they will not “sign up”, but have stopped short of a decisive rejection and have not called further action. An NUT Executive meeting on Thursday 12 January could change that.

Unions should reject the deal because the Government has not shifted a millimetre on any of its main plans for public sector pensions.

• a 3.2 percentage point increase in contributions by 2014/2015: the Government has already announced that the increased contributions will start for teachers and civil servants from April 2012;

• pegging the pension age for public sector employees to the state pension age, which will increase to 67 by 2026 and then on to 70, faster than was planned when the talks on public sector pensions began;

• switching the uprating of benefits from the RPI rate of inflation to CPI, which runs about 0.8% lower, reducing the value of a pension by 15% after 20 years. The Government has already introduced this shift, from April 2011.

The RPI-CPI switch gives a twist to the fourth main Government aim: switching all public sector workers to career-average from final-salary schemes.

A switch to career-average is not necessarily bad. But it all depends on the details of the inflation rate at which bygone years' wages are upgraded to calculate the average, and on the “accrual rate”, the percentage of career-average acquired by each year's contribution.

The civil service union PCS points out: “Career average salary is calculated by taking a percentage of each annual salary and up-rating it by inflation. By cutting the inflation indicator from RPI to CPI, the government at a stroke reduced the value of... [career-average] scheme[s]”. Only with a much better accrual rate can a career average scheme be as valuable as a final-salary one.

In short, public-sector workers will:

• have more taken out of their pay in pension contributions — £100 a month more for even middle-range workers, on top of the continued cuts in real wages recently announced by the Government;

• have to work longer for their pensions, often much longer: workers who can now retire at 60 may have to work until 67 as early as 2026;

• get worse pensions.

What's new? On 19 December a number of union leaders, without consulting even their union executives, effectively, via the media, told the principal personages of the pensions drama, the rank and file workers and the Government, that the campaign was over. Why?

The Government had rearranged some of the detail, not improved it. On 2 November it had already conceded no immediate contributions increase for the lower-paid and protection (though not from the RPI-to-CPI shift) for workers retiring within the next ten years.

On 19 December its main shift was to better “accrual rates” for the health, civil service and teachers’ schemes, balanced by a worse method of calculating “career average”.

The accrual rate is the fractions of career-average pay you earn for each year's contributions. These are to be 1/54 for the NHS, 1/44 for the civil service, 1/57 for teachers. The improvements are not sufficient to “balance” the move from final salary to career average as the amount of which you “accrue” fractions, and methods of calculation of career average which ensure a low figure. Past years’ pay will be inflation-adjusted for inclusion in the average only by CPI (civil service) and CPI plus a bit (health, teachers), not by the pay inflation rate.

The Government is explicit about that: “the accrual rate has been improved. This has been offset by lower revaluation of accruals...”.

In local government, there seems to be a bigger shift. The joint employers/unions document promises no contribution increases before 2014, or only small ones.

Local government pensions work through funds (workers and employers pay into the funds, fund managers invest the money, and pensions are paid out of the fund). In the civil service, teachers’ and health schemes, contributions go into, and pensions are paid out of, general Treasury revenue.

Consequently, the government is not directly bothered by contribution levels for local government workers, and has no direct power to raise them. The funds are regulated by three-yearly expert evaluation of their assets and liabilities, the next one due in 2013.

The Government is happy so long as it can cut the amount it pays from central funds to local authorities to cover the authorities’ contributions to the funds. The December deal gives the Government that cut by worsening pensions (only 1/60 accrual rate, despite a shift to “career-average”; and no commitment on valuation of past years’ pay for calculating “career average”), and bringing the worse pensions in early (2014, while it is 2015 for the other schemes).

No union leader claims to have an actual agreement. The local government “Principles Document” endorsed by Unison and the GMB (and, until 9 January, by Unite) is a framework for further talks (in fact, a framework that gives the government everything they wanted) rather than an actual deal.

The headline media reports — that is, the story as received by the big majority of public sector workers — are that most unions have accepted the Government terms, quit the campaign, and settled down to negotiate fine detail.

A closer look at union statements indicates that most unions have not quite accepted the Government terms. That means the sell-out can be stopped. It also means something else, though.

A firm stand by just a few combative unions could push the Government back even if every other union drops out. PCS and NUT alone alone have enough clout for that.

If a few unions take a firm stand, then they will probably rally others. But if they only demur from full-scale capitulation, have their officials weaselling that they haven't really accepted the Government terms yet, and simultaneously but silently signal doubt about further action, then the weight of media and Government pressure will demobilise workers.

From that angle, even the stand of the PCS leaders is too weak. PCS declared that “the offer on the table in the civil service is not good enough and... the union believes further industrial action should be organised as early as possible in the new year if the government continues to refuse to negotiate on the core issues”.

“Believes further action should be organised” is much weaker than “will organise further action”, or even “proposes further action”.

And, rather than the action being necessary until the government concedes decent pensions, according to the PCS leaders it is necessary only until the government “negotiates on the core issues” (even if it negotiates without giving substantial ground?)

If this sell-out goes through, it will give a go-ahead signal to the Government to redouble attacks on pay and jobs which are going through with minimal resistance, and probably to supplement them with outright attacks on union organisation, of the type seen with the dispute at Langdon School in Newham and with the victimisation of Northampton NUT secretary Pat Markey (see page 15).

Those attacks can only be fended off with the sort of ongoing, self-controlling campaign conducted by the NUT members at Langdon School, scaled up to national level.

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